Pharmacies Get Pinched
By Phaedra Hise

(FORTUNE Small Business) – IT WAS A ROUGH YEAR FOR INDEPENDENT PHARMACISTS, and experts predict that 2007 will be even worse. The cause? New insurance regulations, which will probably force many local pharmacies to either shut down or be acquired.

The troubles began in January 2006, when Medicare Part D went into effect. One of the plan's provisions allowed pharmacy benefit managers, or PBMs, to lower the reimbursement levels they pay to pharmacies for patient medications. They also were allowed to drag out payments, sometimes for months. Since prescriptions account for 97% of the average independent pharmacy's sales, Part D's effect on cash flow and margins was immediate—and devastating. A survey of Wisconsin independent pharmacists found that 60% of them expected the new regulations would force them to close.

Last month pharmacies were dealt an additional blow when the Medicaid program threatened to cut the amount it reimburses pharmacies for generics, a move that would cause "a shakedown," says Bruce Roberts, vice president of the National Community Pharmacists Association. "Some independents will throw up their arms and say, 'I've had it. I'm out of here.' "

To give feedback, please write to fsb_mail@timeinc.com.

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.